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| A palm farm in Kalimantan Island, Indonesia / Courtesy of POSCO International |
By Kim Hyun-bin
POSCO International has decided to enter the palm oil refining business in Indonesia as part of their bold investments in core businesses such as energy, food and eco-friendly parts, the company said, Tuesday.
The company announced that it recently decided to invest $200 million in the palm oil refining business in Indonesia. The investment will be made through AGPA, which was established in Singapore so as to expand its palm oil business.
The construction for the refinery plant is scheduled to start in the fourth quarter of this year and commence operations in the second quarter of 2025 with a production capacity of 500,000 tons per year. Produced products will not only be sold in Indonesia but also exported to Korea and China.
Kalimantan Island is being considered as a strong option for the plant's location. Indonesia is the world's largest palm oil producer, and Kalimantan Island has geographically favorable conditions for procuring palm raw materials and exporting products.
The palm crude oil refining business refers to the further processing of palm crude oil produced in palm farms through a refinery. Refined palm oil is broadly used in the production of common-use items?― including food and cosmetics ― and is also used in bioenergy generation.
Palm oil has the highest productivity per unit area among vegetable oils, 10 times higher than soybean oil and seven times higher than sunflower oil. According to the U.S. Department of Agriculture, the annual demand for global palm oil is expected to grow steadily every year from 77 million tons in 2020 to 95 million tons in 2030.
The price of palm oil was around $600 per ton in 2020, but it soared to $1,800 in the wake of the global supply chain crisis earlier last year. Currently, it stands at $950. Global consulting firm LMC predicts that palm oil prices will continue to remain strong over the next 10 years.
The industry believes that the productivity and economic feasibility of palm oil will greatly contribute to enhancing POSCO International's competitiveness in the palm business and improving profitability.
"We will discover profitable businesses and promote bold investments in order to transform from an existing trading company into a general business company for sustainable growth," POSCO International Vice Chairman Jeong Tak said.
"We will set this year as the first year of a new leap forward in the food business and strengthen business foundations through overseas procurement and investment in in-demand assets."
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